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The multi-commodity firm would on May 30 2013 hold an annual general meeting to consider a number of resolutions, key among them one approving debts outside the firm’s limit.
Directors will seek approval for borrowings beyond the company’s approved limit, which states that such liability should, at any given time, be limited to twice the funds attributable to shareholders and any excess should be sanctioned by shareholders in a general meeting.
This represents one of only a few options the company has in terms of raising funds to support operations.
RioZim last year exceeded its borrowing limit by US$7 million and wants shareholders to note the excess debt and also ratify the borrowings at the forthcoming AGM. The company almost went into judicial management last year as banks, owed US$60 million by RioZim, sought to recover their funds after the company failed to pay on time.
The short-term loans have since been restructured into 24 to 36 months tenure to give the mining firm some breathing space. “The board of directors hereby requests the ratification of the said excess by way of an ordinary resolution,” RioZim said in a statement.
In addition, directors would seek shareholders’ permission to borrow US$10 million beyond the Zimbabwe Stock Exchange-listed mining company’s borrowing limits.
“The board is (also) requesting, until the next annual general meeting, authority to exceed the borrowing limit, as stipulated in the company’s articles, by an additional amount in the sum of U$10 million, if need arises,” RioZim said.
Further, directors will seek shareholders’ approval to extend authority granted at a 1994 AGM to issue up to 10 percent of unissued ordinary shares without the same being first given to ordinary shareholders of the company.
Mining operations are, by nature, expensive, meaning the US$11,6 million the firm raised through a rights offer and private placement remain insufficient for working capital and new projects.
RioZim has a number of strategic initiatives lined up for 2013, including expanding operations, but the projects require huge capital outlays, bearing in mind there are hurdles to raising equity capital as the company might breach the country’s indigenisation provisions.
This is particularly the case regarding the US$45 million capital projects funding new foreign shareholders GEM Raintree Investments Limited, incorporated in Mauritius, had pledged over a five-year period.
The debenture loan has an option for conversion into a loan, which means with a 24,97 percent stake in a firm owned 50 percent by locals, converting the debenture loan into equity would upset indigenisation laws.
In terms of the Indigenisation and Economic Empowerment Act indigenous shareholders are required to own at least 51 percent in local companies.
Nonetheless, while the company might be able to borrow, the debt limit and the amount of capital required remain major challenges.
leeroy
Online Reporter